Ladder Capital Corp

Thank you for standing by. This is the conference operator. Welcome to the Ladder Capital Corp third quarter 2020 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Michelle Wallach, Chief Compliance Officer and Senior Regulatory Counsel. Please go ahead.

Thank you, and good afternoon, everyone. We continue to wish that all of you listening and your families are well and remain safe. Turning to our earnings call for the third quarter 2020, with me this afternoon are Brian Harris, our company's chief executive officer, Pamela McCormick, our president, and Mark Fox, our chief financial officer. Brian, Pamela, and Mark will share their comments about the third quarter, what they are currently seeing in the fourth quarter, and we will then open up the call to questions. This afternoon, we released our financial results for the three and nine months entered September 30th, 2020. The earnings release is available in the Investors Relations section of the company's website, and our quarterly report on Form 10-Q will be filed with the SEC later this week. Before the call begins, I'd like to remind everyone that this call may include forward-looking statements. Actual results may differ materially from those expressed or implied on this call, and we do not undertake any duty to update these statements. I refer you to our most recent Form 10-K and Form 10-Q for a description of some of the risks that may affect our results. We'll also refer to certain non-GAAP measures on this call. Additional information including a reconciliation of these non-GAAP measures to the most comparable GAAP measures, is available on our website, ir.lattercapital.com, and in our earnings release. With that, I'll turn the call over to our president, Pamela McCormick.

Thank you, Michelle, and good afternoon, everyone. For the third quarter, LATF produced core earnings of $19.7 million, or 16 cents per share. Our undepreciated book value per share increased by 18 cents from the prior quarter to $14.35 per share. We continued to increase liquidity and reduce leverage and ended the quarter with unrestricted cash balance of $876 million and an adjusted debt-to-equity ratio net of cash of 2.34 times. As of today, our unrestricted cash balance stands at over $940 million. Our liquidity position continues to be among the best in our sector. We have focused on building liquidity and book value while we wait for the results of next week's election, further clarity on another stimulus package, and a more expansive reopening of the economy. With clarity on these issues nearing closer, our large cash position and modest leverage leaves us both well positioned and well capitalized to begin to take advantage of the investment opportunities we expect to arise as a consequence of this crisis. In the meantime, I'm pleased to report that we have an average collection rate of 98% for interest and rents across our loan and real estate portfolios in the quarter. In addition, no specific loan loss provisions were required. Our overall rate includes 100% collections from our substantial portfolio of net lease properties, which has performed particularly well during the crisis. October collections have been similarly strong across all of our business lines. The credit quality and liquidity of our balance sheet loan portfolio was further evidenced as the portfolio paid down by more than 21% or $739 million from loan payoffs and sales over the second and third quarters. During the third quarter, loan repayments totaled $223 million, including two hotel loans, and we sold a $7 million note at par value. Consequently, as of quarter end, Our $2.7 billion balance sheet loan portfolio represented just 42% of our total assets. Since then, we received over $80 million in additional loan repayments as more loans paid off in October. During the third quarter, we also sold three properties for total proceeds of $64 million, which generated $12 million of core earnings. Strong collections, repayments, and equity sales above book value demonstrate the continued strength of our inherently conservative credit culture. Our middle market focus results in a highly diverse and granular asset base. We maintain relatively small investment sizes across all of our business lines and an average loan size of less than $20 million spread across various sponsors, property types, and geographic locations. With small loan balances, we have seen our middle market borrowers access a larger and more diversified pool of capital providers to refinance their assets, including regional banks and credit unions, debt funds, and governmental agencies. As loans paid off, our total future funding obligations were reduced to just $227 million as of September 30th, the majority of which remain conditional upon the achievement of good news events such as leasing and tenant improvements that would be accretive to the asset. With regard to our security segment, our portfolio has been reduced by more than 25% or $483 million over the second and third quarters through a combination of amortization and sales. As a result, $367 million, or 31% of securities repo debt, has been paid down during the same time, limiting our outstanding securities repo to $823 million. As we continue to strengthen the right side of our balance sheet by reducing our total debt and mark-to-market financing, we are pleased to report that as of today, we only have $288 million of loan repo debt outstanding. 76% of Ladder's capital base is now comprised of unsecured bonds, non-recourse and non-mark-to-market debt, and book equity. And over $2.7 billion, or 43% of our assets are unencumbered, including our unrestricted cash, and $1.2 billion of first mortgage loans. In conclusion, with a strong balance sheet and vast incremental earnings power on hand, we're looking forward to finally taking advantage of the substantial investment opportunities we expect to emerge. Our multi-cylinder business model will allow us to pivot quickly as opportunities present for loans, leases, and or rescue capital on compelling projects with strong sponsors, and we have the necessary liquidity and in-house experience to immediately capitalize on these opportunities. With that, I'll now turn the call over to Mark.